In a surprising turn, NTT DC Reit has launched the largest initial public offering (IPO) for a Singapore real estate investment trust (Reit) in over a decade, despite admitting that the timing may not be ideal due to market instability.

Yutaka Torigoe, CEO of NTT DC Reit Manager, emphasized the long-term vision behind this IPO during a media briefing. He stated, "If we were just looking to make a quick profit, we might have delayed the IPO. However, we see this as a crucial part of our sustainable capital recycling strategy for NTT Group."

The Reit manager debuted its IPO by listing over one billion units on the Singapore Exchange, aiming to raise a hefty US$773 million.

Of the nearly 600 million units available, 569.9 million units are priced at US$1 each for international placements, while 30 million units will be offered to the public in Singapore at S$1.276 each.

Key players in this venture include cornerstone investors like GIC, which is set to acquire over 100 million units, making it the second-largest investor in NTT DC Reit post-listing. Other notable investors include AM Squared, Ghisallo Master Fund, and UBS, among others.

In conjunction with this offering, the sponsor, NTT Ltd, will snap up over 257 million units, representing 25% of the total.

The Singapore public offering kicked off on July 7 and is set to end on July 10, with trading expected to commence on July 14.

NTT DC Reit is forecasting an annualized distribution yield of 7.5% for the fiscal period spanning July 1, 2025, through March 31, 2026.

With an appraised portfolio value of around US$1.6 billion, the assets consist of highly-regarded, carrier-neutral data centers with an impressive infrastructure capacity of about 90.7 megawatts. The portfolio, while primarily freehold, includes a leasehold property in Singapore that will expire in 2070.

Geographically diverse, the assets span key markets including Northern Virginia and Northern California in the U.S., Vienna in Austria, and Singapore. Northern Virginia stands as the world's largest data center market, with Northern California also holding a significant position.

By the end of 2024, the portfolio boasted a healthy occupancy rate of 94.3%, with a weighted average lease expiry of 4.8 years. Notably, hyperscale customers, including leading cloud service providers, accounted for 51% of the total monthly base rent.

The portfolio is set to benefit from built-in organic growth, with nearly 75% of contracts featuring fixed lease escalations averaging 3.3%.

NTT DC Reit has plans for further growth, identifying approximately 130 MW of its sponsor's global data center assets as potential acquisitions over the next five years, which could effectively double its capacity.

Currently, the aggregate leverage at IPO stands at 35%, with 70% of borrowings fixed or hedged to fixed rates, ensuring stability as they head into this pivotal market entry.